In late 1999, Southern California incubator eCompanies plunked down $7.5
million for the Internet address business.com, a move destined to join the
avalanche of Internet Super Bowl ads as prime examples of dot-com excess.
But at the time, the company - billed by its founder as "the Yahoo of
business" - drew considerable attention, not to mention $61 million in
venture money from The Financial Times, media magnate Mort Zuckerman
and publishing house McGraw-Hill. Putting up $7.5 million for a prime Web
address, during the dot-com boom, was similar to the thought behind buying
oceanfront property: location, location, location.

With the dot-com bubble burst, companies like businss.com are struggling to
survive. It would seem the fervor for tony Net addresses has suffered a
similar fate: registrations for the top domains (.com, .net and .org) fell
by 3.5 million from October to June, according to industry researcher
SnapNames.com.

"The constant question is how do I maintain a healthy business here?" says
Mason Cole, publisher of SnapNames.com's "State of the Domain" report.
"Where is the demand for new services?"

For registrars, the companies that rode the wave of interest in Web
addresses, the market has changed, and they must now adapt their businesses
to suit the times.

The Dot-Com Hangover
After showing solid growth for years, the numbers of SnapNames.com's monthly
survey of domain registrations began dropping last October. Verisign, the
registrar industry's clear leader, lost nearly 5 million registrations from
September 2001, nearly 30 of its total domains under Network Solutions
management.

Cole and others in the industry point to two main classes in the loss of so
many registrations: speculators and promotional names. For the speculators,
the lure of scoring the next business.com (or even altavista.com, which went
for $3.5 million) was enough to register domains by the tens of thousands,
hoping a magical word combination would be in high demand. However, with the
dot-com collapse, the speculator market has suffered a similar fall, while
not disappearing altogether.

"There were a lot of names being put into the market that were lottery
tickets," says John Donoghue, senior vice president of Verisgn's registrar
unit.

A second source of lost domain names came from promotional names that were
either given away or sold at basement prices. In the dot-com era, many
registrars played the market-share game, looking to pad their number of
registered sites by cutting deals with corporations owning large numbers of
sites and even with individuals getting their own sites.

"At one point, the industry got very interested in market share, which is
not the right business objective," says Michael Pollack, general manager of
corporate services at Register.com. "We've all realized that we need to get
good customers not necessarily the most."

So how do registrars deal with a shrinking market? While the answers might be obvious, market forces are NOT on their side. See Page 2.